Estate planning clients often ask, “how do I avoid probate?” Their true question is, “How can I make this process easier for my loved ones?”
“Probate” refers to the court supervised process of identifying, collecting, accounting for, and distributing property after death. The probate process is often complex, drawn-out, and always a matter of public record. A Will governs only the distribution of property that passes through probate.
Joint Ownership, Life Estates, and Tenants by the Entirety
Bank accounts, automobiles, and real estate can all be titled as “joint owners with right of survivorship.” Upon the death of one owner, the survivor retains the entire property as surviving owner.
A life estate holder owns property for their life. Upon death, named remainder owners automatically retain title to the property.
Married couples typically own property as “tenants by the entirety.” Upon the death of one spouse, the property automatically passes to the survivor.
Beneficiary Designations
Proceeds from life insurance policies, annuities, and retirement accounts pass to designated beneficiaries outside probate.
You can designate transfer on death or payable on death beneficiaries for stocks, brokerage accounts, CD’s and bank accounts. A named beneficiary inherits the money directly, in a lump sum, independent of the will, and outside probate, and also outside of divorce judgments (make sure to update these if you are going through a divorce)
Trust Planning to Avoid Probate
Trusts are often used to avoid probate, protect heirs, and manage privacy.
All types of property, including bank accounts, real estate, stocks, and businesses can be held in trusts. A trust can also be named as beneficiary of bank accounts, life insurance policies, and retirement accounts.
A trust is a good way to manage property for young people, or others to whom a sudden financial windfall may be inadvisable. Doing so can provide a lifetime of income or guidance until they are ready or able to manage the funds on their own.
A trust can be designed to transfer firearms, provide for pets, fund a college education, protect special needs children, provide lifetime income, and minimize taxes.
Authors: Amy Isaacs and Louise Paglen
The McIntosh Law Firm, P.C.